ASX 200 afternoon report: August 1, 2023

The ASX 200 trades 37 points (0.50%) higher at 7447.5 at 3.40 pm AEST.

Building on the positive momentum from July, which saw a 3.11% gain, the ASX 200 has started August on a robust note. This recent surge is primarily credited to gains on Wall Street.

RBA maintains key cash rate

In parallel, the Reserve Bank of Australia's (RBA) decision to maintain its key cash rate at 4.10% contributed to this upturn. The decision mirrored last month's reasoning, namely to assess the effect of a cumulative 400bp of rate hikes and the evidence of a sustainable balance between supply and demand in the Australian economy.

According to the RBA, "In light of this and the uncertainty surrounding the economic outlook, the Board again decided to hold interest rates steady this month. This will provide further time to assess the impact of the increase in interest rates to date and the economic outlook."

The RBA's inflation outlook and expectations

In its statement, the RBA revealed greater comfort with the inflation outlook, acknowledging that although inflation remains "still too high at 6 per cent", recent data is in line with inflation returning to the target range of 2-3% over the forecast horizon. This outlook, however, depends on productivity growth picking up pace.

Predicting a future rate hike

Despite this, the RBA has held onto its tightening bias, stating that "Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe". This statement aligns with projections for one more 25bp rate hike, likely bringing the cash rate to 4.35% before the end of the year.

The ASX 200 market movements today

The ASX 200 was trading at 7438 +28 points before the RBA announcement before surging another 42 points to a high of 7470 after the on-hold decision.

IT sector

• EML payments added 9.93% to $0.83c
• Zip gained 6.74% to $0.47c
• Sezzle added 4.73%
• Block added 2.98%

Materials sector

The Materials sector was supported after Chinese authorities announced measures yesterday to support consumption and the property market. The Chinese authorities are slowly but surely providing the policy support needed to backstop the economy and boost resource stocks.

• Fortescue gained 1.57% to $22.02
• BHP added 1.13% to $46.53
• Mineral Resources gained 0.45% to $71.75

Energy stocks

Overnight the price of crude oil closed higher at $81.86 (+1.59%) to lock in a 15.77% gain in July. The rally came on the back of tight supply and "Goldilocks" in the US – falling inflation, strong growth data and a dovish Fed.

• Beach Energy added 2% to $1.64
• Santos added 0.82% to $8.03
• Woodside Energy added 0.54% to $38.20

Consumer-facing stocks

Falling inflation and the prospect of an RBA closing in on its terminal peak rate boosted consumer-facing stocks.

• Adair's added 5.88% to $1.80
• Kogan added 2.47% to $6.23
• JB Hi-Fi gained 2.52% to $46.80
• Bega Cheese added 2.15% to $3.32

Financial sector

• Macquarie gained 0.94% to $176.62
• NAB added 0.74% to $28.62
• Westpac added 0.45% to $22.44
• ANZ gained 0.41% to $25.85
• CBA added 0.18% to $105.87

ASX 200 technical analysis

Breaking through the top of a three-month range to its highest level in five months, the ASX 200's positive trajectory is expected to get another boost towards the February 7567 high following the RBA's pause. The outlook remains bullish, leaning against support at 7350/30.

ASX 200 daily chart

• _{TradingView: the figures stated are as of August 1, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}